Effect of the ban on short selling on market prices and volatility

Uwe Helmes*, Julia Henker, Thomas Henker

*Corresponding author for this work

Research output: Contribution to journalArticleResearchpeer-review

2 Citations (Scopus)

Abstract

We examine the effects of the short-selling ban, imposed by Australian regulators in the wake of the global financial crisis, on the trading of financial stocks. Our findings argue against commonly stated reasons for imposing short-sale bans. We find no evidence that short-sale restrictions provide support for stock prices or that they reduce volatility. Moreover, stocks subject to the short-selling ban suffered a severe degradation in market quality. Controlling for the adverse effects of the financial crisis on markets, we show that short-selling restrictions increase intraday volatility, reduce trading activity and increase bid-ask spreads.

Original languageEnglish
Pages (from-to)727-757
Number of pages31
JournalAccounting and Finance
Volume57
Issue number3
Early online date30 Mar 2016
DOIs
Publication statusPublished - Sep 2017

    Fingerprint

Cite this